Uber wars: Monopolist objects to start-up competitor’s political clout

Taxis by Shutterstock.com

Article Highlights

  • Taxi cabs in most cities operate as highly regulated, cartelized industry protected from competition by City Hall.

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  • “Consumer protection” regulation often protects large incumbent businesses from competition.

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  • Anticompetitive regulation kills entrepreneurship, robs consumers of choice, and fosters corruption.

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Taxi cabs in most cities operate as a highly regulated, cartelized industry both restrained from competing and protected from competition by City Hall rules that set rates and keep out entrants.

Today Mother Jones carries a story on a class-action lawsuit by drivers for Uber — a smartphone-based limo service that competes with taxi cabs. The Uber drivers say Uber steals their tips. But here are the parts of the story that relate to anticompetitive regulations:

The San Francisco ride-sharing services Lyft and SideCar rely on drivers who lack taxi medallions; they bypass the regulated market by asking riders for “voluntary donations” in lieu of fares….

Late last year, the California Public Utilities Commission threatened Uber with $20,000 fine for allegedly ignoring insurance regulations, then began drafting a new set of ride sharing rules that could give Uber the squeeze.

This past November, two long-time San Francisco cabbies filed a class-action lawsuit against Uber claiming that it breaks the law by dispatching limos and town cars that are not licensed as taxis. “Simply stated, Uber’s ‘partner’ drivers, who are operating without restriction, are taking passengers, and thus income, away from legally sanctioned taxicab drivers who are literally playing by the rules,” the suit says.

“My biggest beef with these guys is that this app is allowing them to break the law, and the Pubic Utilities Commission is allowing them to get away with it, because they have $50-million venture capitalists as backers,” says Barry Korengold, the president of the San Francisco Cab Drivers Association. “The cab drivers don’t have that kind of money to hire lawyers to fight this.”

p.s. If this issue interest you, I bet you’ll enjoy the noon panel I’m moderating Wednesday at the American Enterprise Institute on anticompetitive “consumer-protection” regulations. The panel stars Uber, the Handmade Toy Alliance, the Institute for Justice, and Slate writer Matt Yglesias.

Here’s AEI’s summary:

Wednesday, March 27, 2013 | 12:00 p.m. – 1:30 p.m.
AEI, Twelfth Floor
1150 Seventeenth Street, NW
Washington, DC 20036

What do artisan toymakers, African American hair braiders, and smartphone-based limousine services have in common? They have all been victims of collusion between big business and big government. For example, DC politicians tried to outlaw Uber, an alternative to taxis, and Mattel supported toy-safety rules that threatened to eliminate mom-and-pop competitors.

“Consumer protection” regulation often protects large incumbent businesses from competition more than it protects consumers from harm. Such anticompetitive regulation kills entrepreneurship, robs consumers of choice, and fosters corruption and cronyism.

Please join us for a discussion of regulation, entrepreneurship, competition, and political influence.

 

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About the Author

 

Timothy P.
Carney
  • Timothy P. Carney helps direct AEI’s Culture of Competition Project, which examines barriers to competition in all areas of American life, from the economy to the world of ideas. Carney has over a decade of experience as a journalist covering the intersection of politics and economics. His work at AEI focuses on how to reinvigorate a competitive culture in America in which all can reap the benefits of a fair economy.


     


    Follow Timothy Carney on Twitter.

  • Email: timothy.carney@aei.org

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